Attention: You need JavaScript enabled to use this site.

What is an interest only mortgage?

With an interest only mortgage, your monthly mortgage payments only cover the interest you owe. This means, over time, the amount borrowed (the capital) does not reduce and will need to be repaid in full at the end of the mortgage term.

For example: If you have an interest only mortgage of £100,000 for 25 years, you will pay the interest on the loan each month. But at the end of the 25 years, you will still owe the full £100,000.

If you have an interest only mortgage or a mortgage that includes an amount borrowed on interest only terms, it’s important to check regularly that your repayment plan is on track to repay the mortgage at the end of the term.

Let us know about your plan

You can update us with your repayment plans by completing our interest only assessment form.



What if I don't have a repayment plan or it is off track?


There are a number of options available to help you repay your interest only mortgage, including:


Making overpayments

You may be able to afford to make additional payments on top of your existing monthly payments.

This would help reduce the amount you owe as well as reduce the amount of interest you would repay over the mortgage term. These can be made through regular overpayments or lump sump payments (early repayment charges may apply, please refer to your most recent illustration for details).



How do I make overpayments?
Changing repayment method

You may be able to afford to switch to a repayment (capital and interest) mortgage or a part interest only part repayment (known as part and part) mortgage.

Unlike an interest only mortgage, this means you would be paying off both the interest and amount you borrowed (capital) each month, leaving no amount or a reduced amount left to repay once the mortgage term ends.



How do I change repayment method?
Changing repayment method and extending mortgage term

To make switching to a repayment (capital and interest) mortgage or a part interest part repayment mortgage more affordable, you could also consider extending your mortgage term.

This would give you more time to repay your mortgage so at the end of the term, there is no amount or a reduced amount left to repay.



How do I change repayment method and extend my mortgage term?

Any changes will be subject to your existing mortgage terms and conditions and our current lending policy. Please refer to your original mortgage offer for details or contact us.



How we've helped others



Mr Yates had reached the end of his mortgage term on his interest only mortgage and no longer had a repayment plan in place to cover the outstanding balance. After contacting us to discuss his options, an income and expenditure assessment was carried out which showed that he would be able to afford monthly overpayments and clear his balance in 2 years. Mr Yates therefore remained on the interest only product he was already on and an arrangement was set up to collect overpayments by Direct Debit each month. This meant that the arrangement was affordable for Mr Yates and the mortgage was on track to be fully repaid 2 years later.
Mr and Mrs Davies had 9 years left on their interest only mortgage when they realised their endowment policy would not repay the remaining balance at the end of the mortgage term. They made an appointment to speak with a mortgage adviser about their options to repay the shortfall and an affordability assessment was carried out. It showed they could afford to change their mortgage to a capital and interest repayment method. This meant that their mortgage would be repaid in full at the end of the term. Mr and Mrs Davies decided to change their mortgage as recommended and kept their endowment policy.
Mrs Smith had reached the end of her interest only mortgage term and although she had enough funds to make a capital repayment to reduce the outstanding balance, she didn’t have the full amount required. After contacting us, an affordability assessment was carried out which found that if she were to reduce her balance with a capital repayment, she could afford to convert the remaining mortgage balance to a capital and interest repayment method, over an extended mortgage term. This meant that when she is ready to retire, providing her monthly repayments are maintained, her mortgage balance will be repaid in full.

Help and advice

The list below shows other helpful organisations who offer free information and advice:


Money Advice Service
Phone: 0800 138 7777
Web: www.moneyadviceservice.org.uk

National Debtline
Phone: 0808 808 4000
Web: www.nationaldebtline.org

Business Debtline
Phone: 0800 197 6026
Web: www.businessdebtline.org

Pay Plan
Phone: 0800 280 2816
Web: www.payplan.com

Shelter
Phone: 0808 800 4444
Web: www.shelter.org.uk

Turn2us
Phone: 0808 802 2000
Web: www.turn2us.org.uk

Citizens Advice
Call your local advice centre or visit www.citizensadvice.org.uk


In addition, the FCA has published an ‘Interest only mortgages: act now and talk to your lender’ leaflet which highlights the benefits of talking to your lender early.


It's not too late to contact us

If you are nearing the end of your mortgage term or have reached the end of your mortgage term and have no repayment plan in place, it's not too late to contact us to discuss your situation. We'll help find a solution that's right for you.

Book an appointment

Use our online booking form to request an appointment in your nearest branch.

Book now

Give us a call

Our dedicated support team are available 9.00am to 5.00pm Monday to Friday.

Call

Send us a message

Send us a secure message and someone from our support team will get back to you.

Send message

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP PAYMENTS ON YOUR MORTGAGE.


Back to top